a

GAO

United States General Accounting Office

Report to the Chairman and Ranking 

Minority Member, Subcommittee on 

Oceans, Atmosphere, and Fisheries, 

Committee on Commerce, Science, and 

Transportation, U.S. Senate

December 2002 INDIVIDUAL 

FISHING QUOTAS

Better Information 

Could Improve 

Program Management

GAO-03-159
All three IFQ programs have experienced some consolidation of quota

holdings. Further, consolidation of surfclam and ocean quahog quota is

greater than National Marine Fisheries Service (NMFS) data indicate,

because different quota holders of record are often part of a single

corporation or family business that, in effect, controls many holdings.

Program rules may affect the extent of consolidation in each IFQ program.

While the Alaskan halibut and sablefish program set specific and measurable

quota limits, the surfclam/ocean quahog and wreckfish programs did not,

relying instead on federal antitrust laws to determine whether any quota

holdings are excessive. Without defined limits on the amount of quota an

individual or entity can hold, it is difficult to determine if any holdings would

be viewed as excessive.

GAO did not identify any instances where foreign entities currently hold or

control quota. While NMFS requires transfer applicants in the halibut and

sablefish program to declare themselves to be U.S. citizens or U.S. entities,

there is no similar requirement for the surfclam/ocean quahog and wreckfish

programs. As a result, in these programs, the potential exists for the transfer

of quota to foreign entities.

The economic effects of the halibut and sablefish IFQ program are not

uniform. Some processors were adversely affected by the IFQ program,

while others benefited; however, it is difficult to quantify the actual effects.

The only estimate of the program’s economic effect on processors is a 2002

study commissioned by the state of Alaska. This study estimated that halibut

processors experienced a 56 percent loss in gross operating margins. While

GAO could not validate or replicate the study’s results, its analysis of public

data and the study’s methodology raised several concerns about the

reliability of the study’s estimates. Also, the study did not take into account

other factors that may affect profits, such as the diversity and value of other

species processed.

Fewer Surfclam Quota Holders Than NMFS Data Indicate

INDIVIDUAL FISHING QUOTAS

Better Information Could Improve

Program Management

www.gao.gov/cgi-bin/getrpt?GAO-03-159.

To view the full report, including the scope

and methodology, click on the link above.

For more information, contact Barry Hill at

(202) 512-3841 or hillb@gao.gov or Keith

Oleson at (415) 904-2218 or olesonk

@gao.gov.

Highlights of GAO-03-159, a report to the

Chairman and Ranking Minority Member,

Subcommittee on Oceans, Atmosphere,

and Fisheries, Committee on Commerce,

Science, and Transportation, U.S. Senate

December 2002

To assist in deliberations on

individual fishing quota (IFQ)

programs, GAO determined (1) the

extent of consolidation of quota

holdings in three IFQ programs

(Alaskan halibut and sablefish,

wreckfish, and surfclam/ocean

quahog); (2) the extent of foreign

holdings of quota in these

programs; and (3) the economic

effect of the IFQ program on

Alaskan halibut and sablefish

processors.

GAO recommends that the

Secretary of Commerce require

• the National Marine Fisheries

Service to collect and analyze

information on quota holders,

including who actually

controls the use of the quota;

• the regional fishery

management councils to define

what constitutes an excessive

share for a particular fishery in

future IFQ programs; and

• the National Marine Fisheries

Service to provide guidance to

the regional councils on the

factors to consider when

determining what constitutes

an excessive share.
Page i GAO-03-159 Individual Fishing Quotas

Contents

Letter 1

Results in Brief 3

Background 5

Consolidation of Quota Holdings Occurred in All Three IFQ 

Programs 14

No Foreign-Owned Entities Currently Hold Quota 19

Economic Effects on Halibut and Sablefish Processors Varied and 

Are Difficult to Quantify 20

Conclusions 29

Recommendations for Executive Action 30

Agency Comments and Our Evaluation 30

Appendix I: Scope and Methodology 33

Appendix II: National Marine Fisheries Service Data on Quota Holdings 35

Appendix III: Surfclam/Ocean Quahog Processing Sector 37

Appendix IV: Alaskan Ports and Major Transportation Networks 38

Appendix V: Comments from the Department of Commerce 41

Appendix VI: GAO Contact and Staff Acknowledgments 49

Tables Table 1: Examples of IFQ Program Objectives 12

Table 2: Summary of Quota Allocation and Accumulation Rules, by 

IFQ Program 13

Table 3: Halibut Buyers, by Category, 1995 and 1999 22

Table 4: Changes in the Number of Plants Processing Halibut and 

Sablefish, 1995 through 2001 23

Table 5: Price Margins in Selected Pre- and Post-IFQ Years 27

Table 6: Average Product Value Percentage, by Species, for Plants 

Processing Halibut and Sablefish, 1994 and 2001 28

Table 7: Alaskan Halibut and Sablefish Quota Holders, 1995 

through 2001 35

Table 8: Wreckfish Quota Holders, 1992 to 2002 35

Table 9: Surfclam and Ocean Quahog Quota Holders, 1990 to 

2002 36

Table 10: Surfclam and Ocean Quahog Processors, 1990 and 2000 37

Table 11: Largest Alaskan Halibut Ports, 1995 and 2001 39

Table 12: Largest Alaskan Sablefish Ports, 1995 and 2001 40
Contents

Page ii GAO-03-159 Individual Fishing Quotas

Figures Figure 1: Halibut Being Displayed 7

Figure 2: Photograph of a Sablefish 8

Figure 3: Drawing of a Wreckfish 9

Figure 4: Drawing of a Surfclam 10

Figure 5: Drawing of an Ocean Quahog 11

Figure 6: Fewer Surfclam Quota Holders Than NMFS Data 

Indicate 15

Figure 7: Fewer Ocean Quahog Quota Holders Than NMFS Data 

Indicate 16

Figure 8: Fresh Halibut as a Percentage of Total Halibut 

Production, 1984 through 2001 21

Figure 9: Ex-Vessel Halibut Prices, 1984 through 2001 26

Figure 10: Map of Alaskan Ports and Major Transportation 

Networks 38

Abbreviations

IFQ individual fishing quota

NMFS National Marine Fisheries Service

NOAA National Oceanic and Atmospheric Administration
Page 1 GAO-03-159 Individual Fishing Quotas

United States General Accounting Office

Washington, D.C. 20548

A

December 11, 2002 Letr

The Honorable John F. Kerry

Chairman

The Honorable Olympia J. Snowe

Ranking Minority Member

Subcommittee on Oceans, Atmosphere, and Fisheries

Committee on Commerce, Science, and Transportation

United States Senate

Overfishing is a problem with far-reaching ecological and economic 

consequences. When a fishery—one or more stocks of fish within a 

geographic area—is unable to sustain itself, it transforms the marine 

ecosystem and threatens the livelihood of many U.S. fishermen. About 

35 percent of the U.S. fish stocks assessed by the Department of 

Commerce’s National Marine Fisheries Service (NMFS) are overfished or 

will be overfished if conditions do not change. Furthermore, while the 

domestic commercial fish catch in the United States remained relatively 

the same in 2001 as it was in 1990, U.S. consumption of domestic and 

imported fish increased by 13 percent.

Fishery management practices in U.S. waters are developed primarily by 

regional fishery management councils established under the 

Magnuson-Stevens Fishery Conservation and Management Act 

(Magnuson-Stevens Act).1

 Fishery management councils, under the 

direction of NMFS, have used several types of controls to maintain the 

health of a fishery. One set of controls focuses on the way fishing is 

conducted, such as placing restrictions on gear (e.g., type and amount), 

vessels (e.g., size), areas fished, times when fishing can occur, or the 

number of people allowed to fish. Another set of controls is designed to 

directly limit the amount of fish caught by setting catch limits for the entire 

fishery or for specific vessels, owners, or operators. In some instances, 

councils may use both types of controls. These efforts have sometimes had 

unintended consequences: fishermen used larger vessels and more gear to 

catch the same amount of fish, and fishing conditions became unsafe when 

fishermen raced to catch as much fish as they could within the time period 

allowed. Such outcomes have led to the search for innovative fishery 

management tools that balance the competing interests of those who 

depend on fishing for their livelihoods and the health of the fish stock.

1

 P.L. 94-265, as amended (16 U.S.C. 1801 et seq.).
Page 2 GAO-03-159 Individual Fishing Quotas

In 1990, NMFS started using individual fishing quotas (IFQ), a conservation 

and management tool that sets catch limits for individual vessel owners or 

operators. Under an IFQ program, a regional fishery management council 

sets a maximum, or total allowable catch, in a particular fishery—typically 

for a year—based on stock assessments and other indicators of biological 

productivity, and it allocates the privilege to harvest a certain portion of the 

catch in the form of quota to eligible vessels, fishermen, or other recipients. 

These quota holders may then fish their quota or lease, sell, or otherwise 

transfer their quota according to program rules. These rules must be 

consistent with U.S. law and regulations. For example, among other things, 

the Magnuson-Stevens Act prohibits any entity from holding an excessive 

share of quota in any particular fishery. In addition, the implementing 

regulations of each program, in effect, generally preclude foreign 

individuals or entities from holding quota.

At the time of our review, NMFS had implemented three IFQ programs: 

(1) the Alaskan halibut and sablefish (black cod) program in 1995, (2) the 

South Atlantic wreckfish (snapper-grouper complex) program in 1992, and 

(3) the Mid-Atlantic surfclam/ocean quahog program in 1990. In addition, 

IFQ programs are being considered for several fisheries, such as the Bering 

Sea crab, the Gulf of Alaska groundfish (e.g., pollock, cod, and sole), and 

the Gulf of Mexico red snapper.

IFQ programs have achieved many of the desired conservation and 

management benefits, such as helping to stabilize fisheries, reducing 

excessive investment in fishing capacity, and improving safety. However, 

they have also raised concerns about the fairness of quota allocations, the 

potential for quota consolidation among a few holders, and the economic 

effects of IFQ programs on the fishing industry and fishing communities. 

Responding to these concerns, Congress, through the Sustainable Fisheries 

Act of 1996, placed a moratorium on new IFQ programs. Congress later 

extended the moratorium through September 30, 2002, and then allowed it 

to expire.

To assist in deliberations on IFQ programs, you asked us to determine 

(1) the extent of consolidation of quota holdings, (2) the extent of foreign 

holdings of quota, and (3) the economic effect of IFQ programs on seafood 

processors. Regarding the economic effect on processors, we limited our 

review to the Alaskan halibut and sablefish processors because few of 

these processors were eligible to hold quota under the provisions of the 

Alaskan IFQ program. In contrast, processors could hold quota under the 

surfclam/ocean quahog program, and most of the wreckfish quota was not 
Page 3 GAO-03-159 Individual Fishing Quotas

being fished. See appendix I for additional details on our scope and 

methodology.

Results in Brief All three IFQ programs have experienced some consolidation of quota 

holdings, and the extent of this consolidation may be affected by each 

program’s governing rules. According to NMFS data, from 1995 through 

2001, the number of halibut and sablefish quota holders decreased by about 

27 and 15 percent, respectively. From 1992 to 2002, the number of 

wreckfish quota holders decreased by 49 percent. From 1990 to 2002, the 

number of surfclam and ocean quahog quota holders decreased by about 17 

and 34 percent, respectively. According to our analysis, however, 

consolidation of surfclam and ocean quahog quota is greater than NMFS 

data indicate, because different quota holders of record are often part of a 

single corporation or family business that, in effect, controls many 

holdings. For example, for 2002, we determined that consolidation of quota 

in the surfclam program was about twice that indicated by NMFS data and 

that one entity alone controlled at least 27 percent of the quota. Program 

rules may affect the extent of consolidation and the information collected 

in each IFQ program. In particular, the Alaskan halibut and sablefish 

program has specific and measurable limits on how much quota any one 

individual or entity can hold. Limits on individual halibut quota holdings, 

for example, range from 0.5 percent to 1.5 percent, depending on the 

fishing area, and sablefish holdings are limited to 1 percent. In contrast, the 

surfclam/ocean quahog and wreckfish programs have no specific and 

measurable limits on quota holdings, relying instead on federal antitrust 

laws to determine whether any quota holdings are excessive. As a result, 

NMFS does not routinely gather and assess information on who controls 

the use of the surfclam/ocean quahog and wreckfish quota. Furthermore, 

without defined limits set by the councils on the amount of quota an 

individual or entity can hold, it is difficult to determine whether any quota 

holdings in a particular fishery would be viewed as excessive, as prohibited 

by the Magnuson-Stevens Act.

We did not identify any instances where foreign entities currently hold or 

control quota. In the surfclam/ocean quahog program, however, a 

U.S. member firm of a foreign business that provides financial services 

recently held quota while acting as a transfer agent in the sale of the quota, 

but it did not control the use of the quota. In addition, two surfclam/ocean 

quahog processors owned by foreign companies controlled the use of 

quota. In one case, a subsidiary of one foreign-owned company received 

quota; however, foreign control of the quota ended when a group of 
Page 4 GAO-03-159 Individual Fishing Quotas

Americans bought out the foreign owners. In the other case, a foreignowned company sold its fishing vessels with qualifying catch histories to an 

individual qualified to receive quota in exchange for control over the quota 

use; control of the quota remained with the foreign-owned processing 

company until the processing company was sold to a U.S.-owned firm. The 

implementing regulations of each program, in effect, generally preclude 

foreign entities from holding quota. The Alaskan halibut and sablefish 

program explicitly prohibits foreign citizens and businesses from holding 

quota and requires all quota transfer applicants to declare themselves to be 

U.S. citizens or U.S. entities. In contrast, the surfclam/ocean quahog and 

wreckfish programs tie eligibility for holding quota to the requirements for 

owning a U.S.-documented vessel engaged in the fisheries of the United 

States, that is, being a U.S. citizen or an entity 75 percent owned and 

controlled by U.S. citizens. However, these two programs do not require 

quota holders or transfer applicants to declare that they are U.S. citizens or 

U.S. entities. As a result, the potential exists for the transfer of surfclam, 

ocean quahog, and wreckfish quota to foreign entities.

The economic effects of the halibut and sablefish IFQ program are not 

uniform. Some processors were adversely affected by the implementation 

of the program, while others benefited. It is difficult, however, to quantify 

the actual effects. With respect to halibut, in particular, the IFQ program 

extended the fishing season from a “race for fish” of a few days to a season 

of 8 months. This resulted in a significant increase in the fresh halibut 

market for some processors and a corresponding decrease in the frozen 

halibut market for others. Sablefish did not undergo a similar market 

change and remained primarily a frozen product sold in the Asian market. 

While we can determine some general effects on processors, information is 

not available to precisely quantify these effects. The only estimate of 

the IFQ program’s economic effect on processors is a 2002 study 

commissioned by the state of Alaska. The study concluded that processors 

were hurt significantly by the IFQ program and estimated that halibut 

processors, for example, experienced a 56 percent ($8.7 million) loss in 

gross operating margins. However, we could not validate or replicate the 

study’s results, because we did not have access to the proprietary data 

used. Nonetheless, our analysis of available public data and the 

methodology used in the study, as well as the analyses of others, raised 

several concerns about the reliability of the study’s estimates. For example, 

the study used pre-IFQ processor margins for 1992-1993—a time period 

where, coincidentally, there was a dip in halibut prices—and, therefore, a 

comparison with post-IFQ margins may indicate greater economic losses to 

processors than would be indicated if different base years were used. Also, 
Page 5 GAO-03-159 Individual Fishing Quotas

the study did not take into account other factors that may affect profits, 

such as the diversity and value of other species processed.

We are making several recommendations to the Secretary of Commerce to 

collect and analyze information on quota holders, require regional fishery 

management councils to define what constitutes an excessive share for the 

fishery in future IFQ programs, and provide guidance to the councils on the 

factors to consider when determining what constitutes an excessive share. 

In commenting on a draft of this report, the department agreed in principle 

with our recommendations to collect and analyze information on quota 

holders and to provide guidance for setting limits on quota holdings in 

future programs. The department, however, disagreed with our 

recommendation to set limits on the amount of quota an individual or entity 

may hold in future IFQ programs, stating that such limits might be 

warranted and necessary in certain cases, but not in all IFQ programs. The 

Magnuson-Stevens Act clearly mandates that new IFQ programs prevent 

any person from acquiring an excessive share of quota. We agree that 

market performance and other issues should be considered and did not 

mean to imply otherwise. We continue to believe that without a specific 

and measurable definition, it would be difficult for the councils and NMFS 

to know whether any quota holding could be viewed as excessive. We have 

revised our recommendations to reflect the full range of considerations 

that need to be taken into account when defining what constitutes an 

excessive share and to focus on the need to provide guidance for making 

this determination in future programs.

Background The Magnuson-Stevens Act granted responsibility for managing 

marine resources to the Secretary of Commerce. The Secretary delegated 

this responsibility to NMFS, which is part of Commerce’s National Oceanic 

and Atmospheric Administration (NOAA). The act established eight 

regional fishery management councils, each with responsibility for making 

recommendations to the Secretary of Commerce about management plans 

for fisheries in federal waters. The eight councils—consisting of fishing 

industry participants, state and federal fishery managers, and other 

interested parties—and their areas of responsibility are New England 

covering waters off Maine, New Hampshire, Massachusetts, Rhode Island, 

and Connecticut; Mid-Atlantic covering waters off New York, New Jersey, 

Delaware, Maryland, Virginia, and North Carolina; South Atlantic covering 

waters off North Carolina, South Carolina, Georgia, and the east coast of 

Florida; Gulf of Mexico covering waters off Texas, Louisiana, Mississippi, 

Alabama, and the west coast of Florida; Caribbean covering waters off the 
Page 6 GAO-03-159 Individual Fishing Quotas

U.S. Virgin Islands and the Commonwealth of Puerto Rico; Pacific covering 

waters off California, Oregon, and Washington; North Pacific covering 

waters off Alaska; and Western Pacific covering waters off Hawaii, 

American Samoa, Guam, the Commonwealth of the Northern Mariana 

Islands, and uninhabited U.S. territories in the Western Pacific.

The Magnuson-Stevens Act also established national standards for fishery 

conservation and management. These standards deal with preventing 

overfishing, using scientific information, ensuring the equitable allocation 

of fishing privileges, preventing excessive accumulation of quota, using 

fishery resources efficiently, minimizing bycatch,2

 minimizing 

administrative costs, promoting safety at sea, and considering the 

importance of fishery resources to fishing communities. The regional 

councils use these standards to guide their development of plans that are 

appropriate to the conservation and management of a fishery, including 

measures to prevent overfishing and rebuild overfished stocks and to 

protect, restore, and promote the long-term health and stability of the 

fishery. These measures may include, for example, requiring permits for 

fishery participants, designating fishing zones, establishing catch limits, 

prohibiting or limiting the use of fishing gear and fishing vessels, and 

establishing a limited access system.

Under the Magnuson-Stevens Act, three regional councils (North Pacific, 

South Atlantic, and Mid-Atlantic) have developed IFQ programs to manage 

the halibut and sablefish, wreckfish, and surfclam/ocean quahog fisheries, 

respectively. Each IFQ program is designed individually, because the 

characteristics of each fishery differ.

Pacific halibut (see fig. 1) and sablefish (see fig. 2) are bottom-dwelling 

species found off the coast of Alaska, among other areas. Halibut weigh 

about 40 pounds, on average, and are found at depths of about 50 to 

650 feet. Sablefish weigh less than 11 pounds, on average, and are found at 

depths of about 325 to 4,925 feet. The halibut and sablefish fishing fleets 

are primarily owner-operated vessels of various lengths that use hook-andline gear to fish for halibut and hook-and-line and pot gear for sablefish. 

Some vessels catch both halibut and sablefish, and, given the location of 

both species, they are often caught as bycatch of the other. Halibut are 

2

 Under the Magnuson-Stevens Act, “bycatch” means fish that are harvested in a fishery, but 

which are not sold or kept for personal use. Bycatch includes fish discarded for regulatory 

or economic reasons.
Page 7 GAO-03-159 Individual Fishing Quotas

primarily sold domestically as a fresh or frozen product, and sablefish 

are primarily sold to the Asian market as a frozen product. In 2001, the 

total halibut and sablefish catch was 45.2 million pounds and 21.7 million 

pounds, respectively.

Figure 1: Halibut Being Displayed

Source: International Pacific Halibut Commission.
Page 8 GAO-03-159 Individual Fishing Quotas

Figure 2: Photograph of a Sablefish

Source: Commander John Bortniak, National Oceanic and Atmospheric Administration 

Corps/Department of Commerce.
Page 9 GAO-03-159 Individual Fishing Quotas

Wreckfish (see fig. 3) are found in the deep waters far off the South Atlantic 

coast, primarily from Florida to South Carolina. They were first discovered 

in the southern Atlantic in the early 1980s by a fisherman recovering lost 

gear. Wreckfish are fished using specialized gear by vessels over 50 feet in 

length that are used primarily in other fisheries. The fishing fleet is small, 

with only three vessels reporting wreckfish landings totaling about 168,000 

pounds—or about 8 percent of the total allowable catch—in 2000. 

Wreckfish are sold fresh or frozen as a market substitute for snapper 

and grouper.

Figure 3: Drawing of a Wreckfish

Source: South Atlantic Fishery Management Council.
Page 10 GAO-03-159 Individual Fishing Quotas

Surfclams (see fig. 4) and ocean quahogs (see fig. 5) are mollusks found 

along the East Coast, primarily from Maine to Virginia, with commercial 

concentrations found off the Mid-Atlantic states. While ocean quahogs are 

found farther offshore than surfclams, the same vessels are largely used in 

each fishery. These vessels pump water down to the ocean floor to raise the 

mollusks and then catch them in a dredge that runs over the bottom. 

Surfclams and ocean quahogs are processed into strips, juice, soup, 

chowder, and sauce. They must be processed generally within 24 hours 

of harvest or they will spoil. In 2000, the surfclam/ocean quahog fishery 

harvested 2.6 million bushels of surfclams and 3.2 million bushels of 

ocean quahogs.

Figure 4: Drawing of a Surfclam

Source: National Marine Fisheries Service, Northeast Fisheries Center Image Archive, Woods Hole,

Massachusetts.
Page 11 GAO-03-159 Individual Fishing Quotas

Figure 5: Drawing of an Ocean Quahog

Source: National Marine Fisheries Service, Northeast Fisheries Center Image Archive, Woods Hole,

Massachusetts.
Page 12 GAO-03-159 Individual Fishing Quotas

When designing the IFQ programs, each regional council set out specific 

objectives for improving conservation and management in their respective 

fisheries. These objectives differed for each program, as shown in table 1, 

depending on the desired biological, social, and economic outcomes for 

the fishery. 

Table 1: Examples of IFQ Program Objectives

a

While not specified as an official objective, this outcome is important to the program.

Source: NMFS and the National Research Council.

Objective

Halibut/ 

sablefish Wreckfish

Surfclam/ 

ocean quahog

Reduce overcapitalization X X a

Maximize efficiencies X

Stabilize fishery X X

Conserve resource a X X

Improve safety X a

Simplify regulation X

Protect fishing participants X
Page 13 GAO-03-159 Individual Fishing Quotas

When designing the IFQ programs, each of the respective regional councils 

also set out who was eligible to receive quota under the initial allocation 

(see table 2). The regional councils based eligibility and amount of quota to 

be received on, among other things, ownership and catch history of the 

vessels that participated during a portion of a set of qualifying years. Some 

halibut, sablefish, surfclam, and ocean quahog processors owned fishing 

vessels with a catch history during the IFQ programs’ qualifying years, and 

therefore received quota under the initial allocation.

Table 2: Summary of Quota Allocation and Accumulation Rules, by IFQ Program

Source: NMFS and the National Research Council.

Rule

Halibut/ 

sablefish Wreckfish

Surfclam/

ocean quahog

Initial allocation based on 

historical catch

X X X

Initial allocation based on 

vessel size

X

Quota divided by geographic 

areas

X

Specific caps on initial 

allocation

X

Specific caps on quota 

accumulation

X
Page 14 GAO-03-159 Individual Fishing Quotas

Consolidation of Quota 

Holdings Occurred in 

All Three IFQ 

Programs

Consolidation of quota holdings occurred in all three IFQ programs, with 

much of it occurring in the early years of each program. In addition, 

consolidation of surfclam and ocean quahog quota is greater than NMFS 

data indicate. The governing rules of each program may have affected the 

extent of consolidation and the information collected. However, without 

clear and accurate data on quota holders and fishery-specific limits on 

quota holdings, it is difficult to determine whether any quota holdings in a 

particular fishery would be viewed as excessive, as prohibited by the 

Magnuson-Stevens Act.

Much of the Consolidation 

Occurred in Early Program 

Years

According to our analysis of NMFS data, from 1995 through 2001, the 

number of halibut and sablefish quota holders decreased by about 27 and 

15 percent, respectively. Over 46 percent of the halibut consolidation and 

35 percent of the sablefish consolidation occurred by the end of the second 

year of the program. From 1992 to 2002, the number of wreckfish quota 

holders decreased by 49 percent, with all of the consolidation occurring by 

the end of the program’s third year.3

 Finally, from 1990 to 2002, the number 

of surfclam and ocean quahog quota holders decreased by about 17 and 

34 percent, respectively. About 58 percent of the surfclam quota 

consolidation and 36 percent of the ocean quahog quota consolidation 

occurred by the start of the second year of the program. (See app. II for 

additional data on changes in quota holdings.)

Consolidation of Surfclam 

and Ocean Quahog Quota Is 

Greater Than NMFS Data 

Indicate

Surfclam and ocean quahog quota consolidation is greater than NMFS data 

indicate. According to NMFS officials and others knowledgeable about the 

fishery, the quota holder of record (i.e., the individual or entity under 

whose name the quota is listed) is often not the entity that controls the use 

of the quota. Some families hold quota under the names of more than one 

family member; some parent corporations hold quota under the names of 

one or more subsidiaries; some entities hold quota under the name of one 

or more incorporated vessels; and some financial institutions serve as 

transfer agents and hold quota on behalf of others or in lieu of collateral 

for loans.

3

 According to NMFS officials, there had been very little activity in the wreckfish program 

since 1995. A National Research Council study of IFQs attributed this lack of activity to low 

market prices of wreckfish compared to other species for which the same vessels can fish.
Page 15 GAO-03-159 Individual Fishing Quotas

After aggregating quota controlled by the same individual or entities, we 

determined that consolidation of surfclam quota holders was about twice 

that indicated by NMFS data. As shown in figure 6, no more than 59 and 42 

individuals or entities controlled surfclam quota in 1990 and 2002, 

respectively. One entity controlled quota held in 12 different names, 

accounting for 27 percent of the 2002 total surfclam quota allocated.

Figure 6: Fewer Surfclam Quota Holders Than NMFS Data Indicate

42 46

59

0

25

50

75

100

125 Number

1990 1992 1994 1996 1998 2000 2002

Year

GAO's estimate of controlling quota holder

NMFS quota holder of record

Source: GAO's analysis of NMFS data.

Note: Controlling quota holder of record refers to the entity that controls the use of the quota.
Page 16 GAO-03-159 Individual Fishing Quotas

Similarly, consolidation of ocean quahog quota holders was about twice 

that indicated by NMFS data. As shown in figure 7, no more than 48 and 29 

individuals or entities controlled ocean quahog quota in 1990 and 2002, 

respectively. One entity controlled quota held in 2 different names, 

representing 22 percent of the 2002 total ocean quahog quota allocated. 

(See app. III for information on consolidation in the surfclam and ocean 

quahog processing sector.)

Figure 7: Fewer Ocean Quahog Quota Holders Than NMFS Data Indicate

29

33

48

0

25

50

75

100 Number

1990 1992 1994 1996 1998 2000 2002

Year

GAO's estimate of controlling quota holder

NMFS quota holder of record

Source: GAO's analysis of NMFS data.

Note: Controlling quota holder refers to the entity that controls the use of the quota.
Page 17 GAO-03-159 Individual Fishing Quotas

The consolidation of surfclam and ocean quahog quota may be even greater 

than our analysis indicates because we could not determine the individuals 

or entities for whom banks hold quota.4

 According to NMFS data, banks 

hold about 21 percent of the 2002 surfclam quota and 27 percent of the 2002 

ocean quahog quota. However, we could not determine for whom the banks 

hold the quota and thus who controls the use of the quota. NMFS officials 

stated that, in theory, they had the ability to identify the individuals or 

entities for whom the banks hold quota. They explained, however, that 

such an analysis would be extremely difficult and labor-intensive because 

their record system is not designed for this purpose. As such, NMFS did not 

provide us with this information.

Program Rules May 

Affect the Extent of 

Consolidation and 

Information Collected

Each program’s governing rules may have affected the extent of 

consolidation and the information NMFS collects and monitors on quota 

holders. To help meet the Magnuson-Stevens Act’s prohibition of any 

individual or entity acquiring an excessive share of the fishery, the regional 

fishery management councils may establish limits on the amount of quota 

any individual or entity can hold. In the Alaskan halibut and sablefish 

program, for example, the council set specific limits on individual holdings 

by, among others, species and area.5

 Limits on individual halibut quota 

holdings, for example, range from 0.5 percent to 1.5 percent, depending on 

the fishing area, and sablefish holdings are limited to 1 percent. NMFS 

collects the information needed to monitor and ensure adherence to these 

requirements. NMFS requires halibut and sablefish transfer applicants to 

identify whether they are individuals or business entities. Business entities 

must also report their ownership interests at least annually. NMFS uses this 

information to ensure that all potential transfers and all current quota 

holdings comply with program rules. NMFS conducts computer checks on 

each transfer request to ensure that the transfer will not result in any entity, 

whether individually or collectively, exceeding the limits for quota 

holdings.

4

 To facilitate financial transactions such as the purchase of quota, a bank or other 

financial institution may serve as a transfer agent. In this situation, an individual sells or 

permanently transfers the quota to the financial institution, which, under separate 

agreement, transfers the quota to the “rightful” owner when the loan is fully paid or in 

installments as loan payments are made. In addition, these agreements establish to whom 

the bank leases the use of the quota each year.

5

 Program rules specify these limits as quota share use caps.
Page 18 GAO-03-159 Individual Fishing Quotas

In contrast, the regional fishery councils for the surfclam/ocean quahog 

and wreckfish programs did not set specific and measurable limits on the 

individual accumulation of quota. Instead, the councils let federal antitrust 

laws determine whether any quota holdings are excessive. However, NMFS 

officials explained that the Department of Justice would most likely base a 

decision for taking an antitrust action on whether or not an individual or 

entity could fix the price of fish, rather than the amount of quota an 

individual or entity held. Further, NMFS officials said that they have never 

referred such a case to the Department of Justice.

The National Research Council pointed out in its 1999 study that “[a] lack 

of accumulation limits may unduly strengthen the market power of some 

quota holders and adversely affect wages and working conditions of labor 

in the fishing industry...”6

 Establishing limits, however, is not an easy task. 

Program objectives and the political, economic, and social characteristics 

of each fishery may influence each council’s definition of what limits 

should be placed on an individual’s or entity’s quota holdings. In addition, 

fishery participants have different opinions on what these limits should be.

Because the surfclam/ocean quahog and wreckfish programs have no 

specific limits on the amount of quota any one individual or entity can hold, 

NMFS does not routinely gather and assess information on the ownership 

interest of each quota holder. For example, NMFS requires transfer 

applicants in the surfclam/ocean quahog program to submit identifying 

information, including the name of the quota holder, the name of the 

related vessel, and the contact information for the quota holder. However, 

NMFS does not verify this information or require transfer applicants or 

quota holders to submit any information detailing ownership interest or 

eligibility. Further, NMFS does not conduct any assessment of the amount 

of quota held or controlled by an individual or entity, and NMFS records are 

not kept in a manner that would readily allow such an assessment. As such, 

it is difficult to determine how much quota any one individual or entity 

controls. Moreover, lacking specific limits on quota holdings, we could not 

determine if any individual’s or entity’s holdings in either the 

surfclam/ocean quahog or the wreckfish programs would be viewed as 

excessive for the fishery, as prohibited by the Magnuson-Stevens Act.

6

 National Research Council, Sharing the Fish: Toward a National Policy on Individual 

Fishing Quotas (Washington, D.C.: National Academy Press, 1999), 209.
Page 19 GAO-03-159 Individual Fishing Quotas

No Foreign-Owned 

Entities Currently Hold 

Quota

We found no evidence that foreign entities currently hold or control quota 

in the three IFQ programs. Furthermore, industry participants and NMFS 

officials said that they did not know of any cases in which a foreign entity 

has been able to acquire quota in either the halibut and sablefish or the 

wreckfish IFQ programs. However, some foreign-owned entities have held 

or controlled quota in the surfclam/ocean quahog program, as the following 

examples show.

• A U.S. member firm of a foreign business that provides financial 

services held about 6 percent of the surfclam quota in 2002 while acting 

as a transfer agent in the sale of the quota. According to a representative 

of the firm, only the buyer and the seller controlled the quota and the 

fishing of the quota. When the sale was finalized in the spring of 2002, 

the quota was released to the buyer. The firm no longer holds quota in 

the fishery.

• A foreign-owned processing company once controlled about 7 percent 

of the surfclam and ocean quahog quota through its U.S. subsidiary. 

Foreign control of the quota ended when a group of fishery participants 

bought out the foreign interest in the processing company.

• On the eve of the implementation of the IFQ program, a foreign-owned 

processing company sold its fishing vessels with qualifying catch 

histories to a U.S. citizen eligible to hold quota. This individual then 

received the quota for these vessels—nearly one-fourth of the quota 

allocated under the initial allocation.7

 However, control of the quota 

remained with the foreign-owned processing company until the 

processing company was sold to a U.S.-owned firm.

The implementing regulations of each IFQ program, in effect, generally 

preclude foreign entities from holding quota. The Alaskan halibut and 

sablefish program explicitly prohibits foreign citizens and businesses from 

holding quota and requires all quota transfer applicants to declare 

themselves to be U.S. citizens or U.S. entities. In contrast, the 

surfclam/ocean quahog and wreckfish programs allocate quota to qualified 

“persons,” defined as U.S. citizens, and tie eligibility for holding quota to 

7

 In the initial allocation, quota shares could only be distributed to owners of fishing 

vessels that landed surfclams or ocean quahogs during certain years. Once the initial 

allocation was made, quota shares could be transferred to entities whether they owned 

a fishing vessel or not.
Page 20 GAO-03-159 Individual Fishing Quotas

the requirements for owning a U.S.-documented vessel engaged in the 

fisheries of the United States, that is, being a U.S. citizen or in the case of a 

corporate owner being 75 percent owned and controlled by U.S. citizens. 

However, these two programs do not require quota holders or transfer 

applicants to declare that they are U.S. citizens or U.S. entities. In addition, 

NMFS officials overseeing the wreckfish program told us that they consider 

the U.S. Coast Guard’s approval of fishing vessel permits to be sufficient for 

determining eligibility to hold quota, because only vessels owned by 

U.S. citizens and U.S. companies are eligible for documentation as a 

U.S. fishing vessel. This procedure may be sufficient when a transfer 

applicant owns a permitted fishing vessel and applies for quota under the 

name used to document the vessel. However, an applicant who does not 

own such a vessel will never go through the Coast Guard verification 

process, because after the initial allocation, quota can be transferred to, 

and held by, nonvessel owners. Without information on the nationality or 

ownership of the quota holder, the potential exists for the transfer of 

surfclam, ocean quahog, and wreckfish quota to foreign entities.

Economic Effects on 

Halibut and Sablefish 

Processors Varied and 

Are Difficult to 

Quantify

Some processors were adversely affected by the implementation of the 

halibut and sablefish IFQ program while others benefited. However, 

quantifying the economic effects of the IFQ program on processors is 

difficult because much of the data needed to measure changes in 

profitability are proprietary. Furthermore, other factors besides the 

IFQ program may lead to changes in processors’ economic situation.

IFQ Program Resulted in 

Changes That Harmed Some 

Processors and Benefited 

Others

The IFQ program changed the environment in which traditional 

shore-based processors operated by extending the halibut and sablefish 

fishing seasons in some areas from several days to 8 months. Before the 

IFQ program was implemented, fishermen had just a few days to fish the 

total allowable catch for the year. Consequently, fishermen provided 

processors with large amounts of fish in a very short period of time, and 

processors organized their operations to process under these conditions. 

With the implementation of the IFQ program, the “race for fish” was 

eliminated because fishermen had more flexibility in choosing when to 

fish, and, as a result, processors received halibut and sablefish in smaller 

quantities over a longer period of time. This extended fishing season 

enabled more halibut to be processed and sold as a fresh product. 

Consequently, the fresh halibut market, as shown in figure 8, increased 
Page 21 GAO-03-159 Individual Fishing Quotas

from 15 percent of the total halibut market in 1994 to 46 percent in 2001. 

Sablefish was not similarly affected, remaining primarily a frozen product 

that is shipped to and sold in the Asian market.

Figure 8: Fresh Halibut as a Percentage of Total Halibut Production, 1984 through 

2001

To take advantage of the fresh market and its potential for higher wholesale 

prices, processors need ready access to highways and air transportation. 

As such, processors with access to transportation systems may have been 

competitively advantaged while those who were in more remote locations 

may have been competitively disadvantaged because transportation costs 

were higher. For example, one processor estimated that the cost to 

transport fresh product from Kodiak Island, Alaska, to Seattle, Washington, 

was about 20 cents a pound higher than from Seward or Homer, Alaska, 

which has ready access to a major road system. (See app. IV for more 

information on Alaskan ports and major transportation networks.) Also, 

processors located near services, such as fuel, ice, stores, and 

entertainment, said that fishermen were more willing to deliver fish to 

them than if these services were not available. 

0

10

20

30

40

50

60 Percent

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

Year

Fresh halibut

IFQ begins

Source: GAO's analysis of Alaska Department of Fish and Game, Commercial Operators Annual

Report data.
Page 22 GAO-03-159 Individual Fishing Quotas

The shift toward fresh product in the halibut market resulting from the IFQ 

program led to the emergence of the buyer-broker, a middleman who buys 

fish at a port and ships it fresh to market. Processors told us that the 

emergence of buyer-brokers, generally one-person operations with lower 

overhead costs, resulted in increased competition for fish and contributed 

to the increase in ex-vessel halibut prices (prices paid to fishermen for raw 

product). As shown in table 3, the percentage of halibut purchased by 

buyer-brokers increased from 3.7 in 1995 to 17.4 in 1999.

Table 3: Halibut Buyers, by Category, 1995 and 1999

a

1995 was the earliest year for which NMFS data were available. 

b

1999 was the latest year we could analyze because, starting in 2000, buyers could identify 

themselves in multiple categories.

Source: NMFS.

Percent of halibut purchased

Category 1995a 1999b

Buyer-broker 3.7 17.4

Shore-based processors 84.9 73.8

Other 11.4 8.8

Total 100.0 100.0
Page 23 GAO-03-159 Individual Fishing Quotas

Along with an increase in buyer-broker halibut purchases, there was a 

decrease in the number of individual shore-based plants that processed 

halibut and sablefish. While some plants stopped processing halibut and 

sablefish, others decided it was beneficial to start. Between 1995 and 2001, 

as shown in table 4, 68 plants stopped processing halibut and 56 started, 

resulting in a net decrease of 12 plants. Similarly, 54 plants stopped 

processing sablefish and 40 started, resulting in a net decline of 14 plants.

Table 4: Changes in the Number of Plants Processing Halibut and Sablefish, 

1995 through 2001

a

1995 was the earliest year for which NMFS data were available.

Source: GAO’s analysis of NMFS data.

Most of the shore-based plants that stopped or started processing were 

relatively small in comparison to other processors in that they purchased 

less than 100,000 pounds of halibut or sablefish annually. About 80 percent 

of the shore-based plants that stopped processing halibut and 75 percent of 

those that started purchased less than 100,000 pounds of fish. Similarly, 

about 81 percent of the plants that stopped processing sablefish and 

70 percent of those that started were also small plants.

The IFQ program, however, did not necessarily cause a plant to stop 

processing halibut or sablefish. According to industry and government 

officials, some plants stopped processing halibut or sablefish because the 

plant was sold to another processor, the plant closed for personal reasons, 

plant management made poor business decisions that were unrelated to the 

IFQ program, or the plant burned down. For example:

• One processor with a freezing operation bought halibut and sablefish, 

but it primarily bought and sold salmon off trollers. When the supply of 

farmed salmon increased, contributing to price decreases, the owners 

decided to sell the plant.

Plant status Halibut Sablefish

Processing in 1995a 84 57

Stopped processing between 

1995 and 2001 (68) (54)

Started processing between 

1995 and 2001 56 40

Processing in 2001 72 43
Page 24 GAO-03-159 Individual Fishing Quotas

• One company that owned several plants consolidated its halibut 

production under fewer plants.

• One plant went out of business because its owner paid too much for 

fish—10 to 15 cents a pound more than others—and then resold it for 

less than he paid.

• One plant burned down and the processor now uses the site to offload 

fish from vessels and then transport it to another site for processing.

In addition to changes in the number of plants processing halibut and 

sablefish, companies experienced some change in their market share.8

Some processing companies lost market share, while others gained market 

share. Comparing market shares for 1995 and 2001, we found that of 28 

companies that processed halibut in 1995, 15 experienced a decrease in 

market share and 13 experienced an increase. Similarly, of the 17 

companies that processed sablefish in 1995, 7 experienced a decrease in 

market share while 10 experienced an increase.

State of Alaska Study Found 

Processors Hurt by IFQ 

Program, but Results 

Cannot Be Validated

To determine the IFQ program’s effect on processors, Alaska’s Department 

of Fish and Game commissioned a study to examine how halibut and 

sablefish processors were affected economically.9

 This was the only study 

we could find that attempted to quantify the economic effect the IFQ 

program had on halibut and sablefish processors. Using a sample of halibut 

and sablefish processors, the study assessed the change in processors’ 

gross operating margins (revenues minus variable costs of processing). The 

study used the periods 1992-1993 for pre-IFQ margins and 1999-2000 for 

post-IFQ margins. According to the study’s principal author, these years 

were chosen because they provided the longest possible length of time 

between the pre- and post-IFQ years for which data were available. The 

study estimated that halibut processors suffered a 56 percent, or 

$8.7 million, loss in gross operating margins because the IFQ program 

8

 The market share of a company is the amount of fish purchased by that processing 

company as a percentage of total fish purchased by all processing companies. Processing 

companies, in this context, are those companies that own one or more of the individual 

shore-based plants that are processing halibut or sablefish. 

9

 Matulich, Scott C., and Michael Clark, Efficiency and Equity Choices in Fishery 

Rationalization Policy Design: An Examination of the North Pacific Halibut and 

Sablefish IFQ Policy Impacts on Processors, Washington State University, January 2002.
Page 25 GAO-03-159 Individual Fishing Quotas

caused halibut prices to increase and processors’ market shares 

to change.10

While we could not validate or replicate the study’s results because the 

proprietary data used in the study were confidential, we identified a 

number of problems with the study’s methodology and scope that brings 

into question the reliability of the study’s estimates. These problems 

include (1) the pre- and post-IFQ time periods do not provide an accurate 

measure of processors’ economic welfare, (2) the study’s results may 

not be representative of the industry as a whole, and (3) the document 

requesting economic information from processors may have biased 

participant responses. Further, the study’s authors acknowledged that 

examining the pre- and post-IFQ impacts on the processing sector does not 

necessarily imply that the IFQ program alone caused these effects.

The pre- and post-IFQ time periods used to assess changes in processors’ 

gross operating margins do not provide an accurate measure of changes in 

processors’ economic welfare over time. First, the study’s methodology 

makes the assumption that all costs, except labor and material inputs, 

remain fixed from 1992 through 2000. However, as pointed out in a critique 

of the study, assuming that all of these other costs remain the same would 

not be adequate for a period as short as a year, and is clearly unjustified for 

the 7 year period evaluated, because the longer the time period assessed, 

the more likely costs will change.11

Even if the study’s assumption about costs were valid, the pre- and postIFQ periods examined identify a greater negative change in gross operating 

margins than may be identified if different or longer periods were used. The 

changes in gross operating margins and the estimated economic effects are 

influenced by the fact that ex-vessel halibut prices dipped in the period 

1992-1993 and were near their peak in 1999-2000 (see fig. 9). Real ex-vessel 

halibut prices in 1999-2000 were 44.5 percent higher than they were in 1992-

1993. However, when different base years, such as 1991-1992, are compared 

with 1999-2000, the price increase is 22.7 percent.

10 The study also estimated that gross operating margins for sablefish processors decreased 

by 75 percent, on average. However, we did not review the sablefish estimates because the 

methodology and adjustments used in the study were not clear to NMFS economists or us.

11 Halvorsen, Robert, Comments on the Matulich and Clark Report, “Efficiency and Equity 

Choices in Fishery Rationalization Policy Design,” University of Washington, April 2002.
Page 26 GAO-03-159 Individual Fishing Quotas

Figure 9: Ex-Vessel Halibut Prices, 1984 through 2001

The influence of the choice of base years and the corresponding ex-vessel 

prices also can be demonstrated by looking at the difference between the 

price a processor pays for raw fish and the price a processor receives 

for the processed fish—the processor’s price margin. We calculated a 

simplified version of the price margin to demonstrate the sensitivity of the 

margin to the choice of the time period examined. As shown in table 5, 

comparing the study’s pre- and post-IFQ price margins of 47.3 percent and 

24.1 percent, respectively, shows a 23.2 percentage point decrease in 

margins. However, comparing the price margins for 1991-1992 with 

1999-2000 shows a 13.0 percentage point decrease and comparing 

1993-1994 with 1998-1999 shows a 1.1 percentage point increase.

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00 Price per pound

198419851986198719881989199019911992199319941995199619971998199920002001

Year

Fresh halibut

IFQ begins

Source: GAO's analysis of Alaska Department of Fish and Game, Commercial Operators Annual

Report data.

Note: Ex-vessel halibut prices were adjusted to 1996 dollars using the Bureau of Economic

Analysis's Gross Domestic Product implicit price deflator.
Page 27 GAO-03-159 Individual Fishing Quotas

Table 5: Price Margins in Selected Pre- and Post-IFQ Years

a

Price margin is the percentage by which real wholesale price exceeds real ex-vessel price, excluding 

other variable costs. We did not incorporate recovery rates (the amount of raw product required to 

produce the finished product) or product mix in price margin calculations.

b

Years used in the state of Alaska study.

Source: GAO’s analysis of Alaska Department of Fish and Game, Commercial Operators Annual 

Report data.

Moreover, the study’s results may not be representative of the industry as a 

whole. In total, 53 halibut processors and 46 sablefish processors, 

representing 88 percent of all halibut purchased and 96 percent of all 

sablefish purchased in the study years, were asked to participate in the 

survey. Responses were used from processors representing only 52 percent 

of all halibut and 54 percent of all sablefish purchased in the pre-IFQ years 

and 61 percent of all halibut and 59 percent of all sablefish purchased in 

the post-IFQ years. The study does not provide the actual number of 

participants whose data were used. Without knowing the number of 

participants or the characteristics of the respondents whose data were 

used, we cannot determine whether the study’s estimates are 

representative of the industry as a whole.

Finally, the document requesting economic information from processors 

may have biased participant responses. In the preamble to the survey 

document, participants were told, among other things, that the purpose of 

the study was to test the theory that a harvester-only quota allocation 

transfers wealth from processors to harvesters and that the survey’s results 

would be used to assist in designing future IFQ or other fishery 

rationalization programs. Such statements leave little doubt as to 

how responses could benefit or harm processors with economic interests 

in other fisheries. According to standard economic research practice, these 

types of statements are to be avoided when designing a survey as they can 

influence the results.

Pre-IFQ Post-IFQ

Years Price margina Years Price margina

1991-1992 37.1 1998-1999 31.4

1992-1993b 47.3 1999-2000b 24.1

1993-1994 30.3 2000-2001 23.3
Page 28 GAO-03-159 Individual Fishing Quotas

Factors Other Than the 

Implementation of the IFQ 

Program Could Affect 

Processors Economically

Factors other than the IFQ program’s implementation could contribute to 

changes in the economic well-being of processors, such as changes in the 

market of other species processed and changes in the total allowable catch. 

According to NMFS officials and industry experts, most processors 

handled other species of fish in addition to halibut and sablefish, and the 

relative proportion and value of these species will affect the economic 

condition of processors. According to our analysis of data from the Alaska 

Commercial Operators Annual Report, halibut and sablefish were relatively 

small portions of the fish processed by shore-based plants that processed 

halibut and/or sablefish. Specifically, from 1994 to 2001, halibut production 

ranged, on average, from 2.0 percent to 4.1 percent of all fish processed at a 

plant, while average sablefish production ranged from 1.4 percent to 

2.3 percent. In terms of value, as shown in table 6, halibut was 4.4 percent 

of total plant product value in 1994 and 7.9 percent in 2001. Sablefish was 

4.7 percent of total plant product value in 1994 and 5.3 percent in 2001. 

(These ranges are averages for all plants processing halibut and/or 

sablefish and a particular plant may process a higher percentage of these 

fish.)

Table 6: Average Product Value Percentage, by Species, for Plants Processing 

Halibut and Sablefish, 1994 and 2001

a

Other species include crab, flounder, greenling, herring, lingcod, octopus, perch, prowfish, rockfish, 

shrimp, skate, sole, and turbot.

Source: GAO’s analysis of Alaska Department of Fish and Game, Commercial Operators Annual 

Report data.

Another factor that affects processors economically is a change in the total 

allowable catch—limits on the amount of fish that can be caught annually. 

Such limits were used for halibut and sablefish long before the introduction 

of the IFQ program. Since the introduction of the IFQ program, the total 

Percent of product value

Species 1994 2001

Halibut 4.4 7.9

Sablefish 4.7 5.3

Cod 5.7 9.5

Pollock 12.6 27.6

Salmon 46.7 35.1

Other speciesa 25.9 14.6

Total 100.0 100.0
Page 29 GAO-03-159 Individual Fishing Quotas

allowable catch for halibut has increased by 56.4 percent and the total 

allowable catch for sablefish has decreased by 36.2 percent. In its 1999 

report, Sharing the Fish, the National Research Council said that changes 

in the total allowable catch may affect the supply of fish available to 

processors and therefore the price they pay.12

Conclusions Individual fishing quotas are one of many tools available for conserving and 

managing fishery resources on a sustainable basis. Concerns have been 

raised about the possibility of quota holdings becoming concentrated 

among a few individuals or entities, which, among other things, might lead 

to control of fish prices and/or might adversely affect wages and working 

conditions in the fishing industry. Moreover, there is a need to ensure that 

program rules on foreign holdings and quota concentration levels are 

complied with. NMFS collects the necessary data on halibut and sablefish 

quota holders and periodically monitors it to provide these assurances. 

However, NMFS does not gather sufficient information or periodically 

analyze the data it does collect on surfclam/ocean quahog and wreckfish 

quota holders to determine (1) who actually controls the use of the quota 

and (2) whether the holder is a foreign individual or entity. Furthermore, 

while each fishery is different, the regional councils have not defined the 

amount of quota that constitutes an excessive share in the surfclam/ocean 

quahog and wreckfish IFQ programs. Different program objectives and the 

political, economic, and social characteristics of each fishery make it 

difficult to define excessive share. However, without the information on 

who controls quota and defined limits on quota accumulation, NMFS 

cannot determine whether eligibility requirements are being met or raise 

questions as to whether any quota holdings are excessive.

12 Sharing the Fish, 403.
Page 30 GAO-03-159 Individual Fishing Quotas

Recommendations for 

Executive Action

We recommend that the Secretary of Commerce take the following actions 

to improve the management of IFQ programs:

• To ensure that quota holders meet eligibility requirements, such as being 

a U.S. citizen or entity, we recommend that the Secretary of Commerce 

direct the Director of NMFS to collect and analyze information on quota 

holders, including who actually holds and controls the use of the quota 

and for whom financial institutions hold quota.

• To help prevent an individual or entity from acquiring an excessive 

share of the quota in future IFQ programs, we recommend that the 

Secretary of Commerce require regional fishery management councils 

to define what constitutes an excessive share for the fishery.

• To assist the regional fishery management councils in defining excessive 

share for a particular fishery, we recommend that the Secretary of 

Commerce direct the Director of NMFS to provide guidance to the 

councils on the factors to consider when determining what constitutes 

an excessive share in future IFQ programs.

Agency Comments and 

Our Evaluation

We provided a draft of this report to the Department of Commerce for 

review and comment. In the Secretary’s response, the Department’s 

National Oceanic and Atmospheric Administration provided written 

comments. NOAA’s comments and our detailed responses are presented in 

appendix V of this report. NOAA generally agreed with the accuracy and 

conclusions of our report. NOAA agreed in principle with our 

recommendation to collect and analyze information on quota holders, 

disagreed with our recommendation to set limits, and agreed with our 

recommendation to provide guidance for setting limits on quota holdings in 

future programs. NOAA also provided technical comments that we 

incorporated in the report as appropriate.

NOAA agreed in principle with our first recommendation, to collect and 

analyze information on quota holders. While NOAA stated that it would 

place greater emphasis on collecting this information in its IFQ programs, 

it noted that its ability to collect economic information might be 

constrained by provisions of the Magnuson-Stevens Act that protect certain 

economic and proprietary data. NOAA believed that existing IFQ programs 

provide adequate information on quota holders, citing, for example, the 

Alaskan halibut and sablefish program, but stated it would be difficult to 
Page 31 GAO-03-159 Individual Fishing Quotas

collect information on who actually controlled the quota. However, our 

recommendation is aimed at requiring all IFQ programs to collect 

information similar to the information collected in the Alaskan halibut and 

sablefish program. We do not believe that information on the identity of 

quota holders and their ownership interests involves economic data 

protected by the Magnuson-Stevens Act, and, in fact, the Alaskan program 

requires that such information be provided. We also believe that without a 

requirement to collect similar information in all IFQ programs, it will be 

difficult, if not impossible, to monitor for compliance with eligibility 

requirements. Such information is especially important where banks hold 

quota on behalf of others, such as in the surfclam/ocean quahog program. 

NOAA disagreed with our second recommendation, to set limits on the 

amount of quota an individual or entity may hold in future IFQ programs. 

NOAA acknowledged that avoiding excessive shares was a serious 

mandate and that fishery management councils should analyze the 

projected impacts of various levels of ownership on market performance, 

distributional issues, and equity considerations. NOAA stated, however, 

that councils should have flexibility to deal with preventing excessive 

shares according to the circumstances of each IFQ program and that limits 

on quota holdings might be warranted and necessary in certain cases, but 

not in all IFQ programs. NOAA cited the wreckfish program—a program 

where there has been little activity—as an example where limits should not 

be required. We agree with NOAA’s position that circumstances vary from 

fishery to fishery and that councils need to analyze the various issues when 

determining how to prevent excessive shares. We continue to believe, 

however, that fishery management councils need to define what constitutes 

excessive share for future IFQ programs. The Magnuson-Stevens Act 

clearly mandates that new IFQ programs prevent any person from 

acquiring an excessive share of quota. Without a specific and measurable 

definition, it would be difficult for councils and NMFS to know whether 

any quota holding could be viewed as excessive. A similar conclusion was 

reached by the National Research Council, which recommended the 

creation of fishery-specific limits on the accumulation of quota share by 

individuals or firms in each new IFQ program. We have revised our 

recommendation to reflect the full range of economic, social, and political 

considerations that need to be taken into account and the need for 

guidance to assist councils in determining excessive share.

Finally, NOAA agreed with our third recommendation, to provide guidance 

to fishery management councils on factors to consider when setting limits 

on quota holdings in future IFQ programs. NOAA agreed that limits should 
Page 32 GAO-03-159 Individual Fishing Quotas

be based on factors that are appropriate to the fishery. These factors 

include market effects, distributional issues, and equity considerations. We 

have revised this recommendation, however, from “providing guidance for 

setting limits” to “providing guidance for defining what constitutes an 

excessive share” to take into account NOAA’s comments and make it 

consistent with our second recommendation.

We conducted our review from April 2002 through October 2002 in 

accordance with generally accepted government auditing standards. 

As agreed with your offices, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies of this report to the Secretary 

of Commerce and the Director of the National Marine Fisheries Service. We 

will also provide copies to others upon request. In addition, the report will 

be available at no charge on the GAO Web site at http://www.gao.gov.

If you or your staff have any questions about this report, please call me at 

(202) 512-3841 or Keith Oleson at (415) 904-2218. Key contributors to this 

report are listed in appendix VI.

Barry T. Hill

Director, Natural Resources 

and Environment
Page 33 GAO-03-159 Individual Fishing Quotas

Appendix I

Scope and Methodology ApendxiI

To assist in deliberations on individual fishing quota (IFQ) programs, we 

reviewed the Alaskan halibut and sablefish, wreckfish, and surfclam/ocean 

quahog programs to determine (1) the extent of consolidation of quota 

holdings, (2) the extent of foreign holdings of quota, and (3) the economic 

effect of IFQ programs on seafood processors.

For all three objectives, we interviewed agency officials at the Department 

of Commerce’s National Marine Fishery Service’s (NMFS) headquarters 

office and the Northeast, Southeast, and Alaska regional offices; 

representatives of the Mid-Atlantic, South Atlantic, and North Pacific 

Fishery Management Councils; officials from the Alaska Department of 

Fish and Game; and fishery participants, researchers, and other industry 

experts. We visited Easton, Maryland; Cape May and Atlantic City, New 

Jersey; and Sitka, Petersburg, Juneau, Homer, Seward, and Kodiak, Alaska, 

where we interviewed quota holders, processors, and industry 

representatives and viewed processing plants. We selected these sites in 

accordance with suggestions from program managers and industry 

representatives to obtain IFQ program and geographic coverage.

In addition, to determine the extent of consolidation of quota holdings, for 

each IFQ program, we reviewed pertinent laws, rules, and regulations; the 

fishery management plan; processes and procedures; and relevant program 

documents that NMFS used to track quota holdings. We analyzed NMFS 

data on quota allocations and transfers, searched public corporate 

ownership and U.S. Coast Guard vessel documentation records, and 

interviewed NMFS officials, industry experts, and fishery participants to 

identify who controlled the use of the quota. As agreed with the requesters, 

we did not review the Maine mahogany quahogs as part of the 

surfclam/ocean quahog IFQ program because of the fishery’s small size and 

unique characteristics.

To determine the extent of foreign holdings of quota, we reviewed federal 

laws, regulations, and IFQ program rules pertaining to foreign individuals 

holding quota in U.S. fisheries. We also reviewed the U.S. Coast Guard’s 

requirements for documenting U.S. fishing vessels. We searched public 

records on corporate ownership for foreign interest in, and affiliation with, 

entities holding quota.

To determine the economic effect of IFQ programs on seafood processors, 

we limited our assessment to the economic effects on Alaskan halibut and 

sablefish processors because few of these processors were eligible to hold 

quota under the IFQ program. In contrast, processors in the surfclam/ocean 
Appendix I

Scope and Methodology

Page 34 GAO-03-159 Individual Fishing Quotas

quahog and wreckfish programs were eligible to hold quota. We analyzed 

(1) NMFS data on registered buyers, landings by port, and total allowable 

catch; (2) Alaska Department of Fish and Game, Commercial Operators 

Annual Report data on fish production, ex-vessel prices, and processing at 

shore-based plants; and (3) public records on ownership of seafood 

processing companies. We interviewed fishery participants, including 

NMFS and regional management council officials, seafood processors, 

quota holders, researchers, and other experts on IFQ programs, to identify 

changes in the processing sector after the IFQ program’s implementation. 

We searched the economic literature on the Alaskan halibut and sablefish 

IFQ program and reviewed the only study that quantified the economic 

effect of the IFQ program on processors, interviewed the study’s principal 

author, and obtained the views of other economists who had reviewed the 

study. We could not verify the study’s results because the data used in the 

study were proprietary.
Page 35 GAO-03-159 Individual Fishing Quotas

Appendix II

National Marine Fisheries Service Data on 

Quota Holdings ApendxiI

NMFS data on quota holdings show that consolidation occurred in all three 

IFQ programs—Alaskan halibut and sablefish (see table 7), wreckfish (see 

table 8), and surfclam/ocean quahog (see table 9)—with much of the 

consolidation occurring in early program years.

Table 7: Alaskan Halibut and Sablefish Quota Holders, 1995 through 2001

Note: For 1995, NMFS reported the number of holders who received quota during the initial allocation. 

Thereafter, NMFS reported the number of holders as of December 31 of each year.

Source: GAO’s analysis of NMFS data.

Table 8: Wreckfish Quota Holders, 1992 to 2002

Source: GAO’s analysis of NMFS data.

Year

Item 1995 1996 1997 1998 1999 2000 2001

Number of halibut quota holders 4,828 4,227 3,913 3,795 3,677 3,610 3,532

Cumulative percent change (12.4) (19.0) (21.4) (23.8) (25.2) (26.8)

Number of sablefish quota holders 1,051 994 940 919 902 890 889

Cumulative percent change (5.4) (10.6) (12.6) (14.2) (15.3) (15.4)

Year

Item 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Number of wreckfish quota holders 49 35 26 25 25 25 25 25 25 25 25

Cumulative percent change (28.6) (46.9) (49.0) (49.0) (49.0) (49.0) (49.0) (49.0) (49.0) (49.0)
Appendix II

National Marine Fisheries Service Data on 

Quota Holdings

Page 36 GAO-03-159 Individual Fishing Quotas

Table 9: Surfclam and Ocean Quahog Quota Holders, 1990 to 2002

Note: Quota allocations held under the same name were aggregated to obtain a unique count of quota 

holders.

Source: GAO’s analysis of NMFS data.

Year

Item 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Number of surfclam quota 

holders 111 100 100 102 99 104 103 103 102 98 98 94 92

Cumulative percent change (9.9) (9.9) (8.1) (10.8) (6.3) (7.2) (7.2) (8.1) (11.7) (11.7) (15.3) (17.1)

Number of ocean quahog 

quota holders 82 72 73 70 59 63 61 58 60 58 57 55 54

Cumulative percent change (12.2) (11.0) (14.6) (28.0) (23.2) (25.6) (29.3) (26.8) (29.3) (30.5) (32.9) (34.1)
Page 37 GAO-03-159 Individual Fishing Quotas

Appendix III

Surfclam/Ocean Quahog Processing Sector ApendxiI

Major holders of surfclam and ocean quahog quota include seafood 

processors that are vertically integrated--owning both processing plants 

and fishing vessels. Processing companies that owned fishing vessels were 

eligible to receive quota under the initial quota allocation and some have 

held quota from the beginning of the IFQ program. The IFQ program also 

allows processing companies to purchase and transfer surfclam/ocean 

quahog quota. According to NMFS data, three-fourths of the companies 

that processed surfclams and all of the companies that processed ocean 

quahogs in 2000 were quota holders. In addition, our analysis of NMFS 

quota allocation data for 2000 showed that seafood processors held about 

one-third of the total surfclam quota and almost one-half of the total ocean 

quahog quota.

Further, NMFS data indicate that fewer processors processed surfclams 

and ocean quahogs since the IFQ program was implemented and that 

several small- and mid-sized processors left the fishery. The number of 

surfclam processors decreased by more than 40 percent and the number of 

ocean quahog processors decreased by more than two-thirds from 1990 to 

2000 (see table 10), with the same key companies processing both 

surfclams and ocean quahogs.13 The top 4 processors handled about 

74 percent of the surfclam catch in 1990 and 86 percent in 2000.

Table 10: Surfclam and Ocean Quahog Processors, 1990 and 2000

Source: GAO’s analysis of NMFS data.

13 NMFS was only able to provide processor data through the year 2000.

Number of processors

Processor type 1990 2000

Surfclams 15 8

Ocean quahogs 14 4
Page 38 GAO-03-159 Individual Fishing Quotas

Appendix IV

Alaskan Ports and Major Transportation 

Networks ApendxiIV

Ready access to highways and air transportation makes it easier for 

processors and buyer-brokers to take advantage of the fresh fish market 

and its potential for higher wholesale prices because they can get their 

products to market more quickly and at a lower cost than processors or 

other buyers in more remote locations. Figure 10 shows the location of 

major Alaskan halibut and sablefish ports in relation to major 

transportation networks leading to the lower 48 states and international 

destinations.

Figure 10: Map of Alaskan Ports and Major Transportation Networks

Seward

Anchorage

Kodiak

Homer

Yakutat

Pelican

Sitka

Cordova

Petersburg

Juneau

Hoonah 

Highways

Alaska Southcentral & Southwest Ferry

International Airport

Canada 

Bering Sea

Gulf of Alaska

Adak

Unalaska/Dutch Harbor

United States

Ketchikan

Source: Prepared by GAO using data provided by the Alaska Department of Community and

Economic Development.
Appendix IV

Alaskan Ports and Major Transportation 

Networks

Page 39 GAO-03-159 Individual Fishing Quotas

The Alaskan port with the greatest amount of halibut landed changed 

between 1995 and 2001, as shown in table 11. NMFS and industry officials 

attribute much of the change in port rankings to the increase in the fresh 

halibut market and the need for ready access to transportation networks. 

While ports may have access to air and ferry service to the lower 48 states, 

the number of flights and ferries may be limited and subject to weather 

delays or cancellations.

Table 11: Largest Alaskan Halibut Ports, 1995 and 2001

Note: Juneau ranked number 13 with 1.4 percent of the landings in 1995 and number 6 with 

4.2 percent in 2001. Adak had no reported landings in 1995 and ranked number 8 with 3.8 percent 

of the landings in 2001.

a

1995 was the earliest year for which NMFS data were available.

b

Ports with limited access to major transportation networks.

Source: GAO’s analysis of NMFS data.

Port 1995a ranking

Percent of 1995

landings 2001 ranking

Percent of 2001

landings

Kodiakb 1 23.0 2 15.3

Homer 2 9.7 1 24.0

Sitkab 3 8.8 5 4.6

Unalaska/Dutch Harborb 4 8.6 3 11.1

Seward 5 8.5 4 11.0

Petersburgb 6 7.2 7 4.0

Hoonahb 7 2.8 9 2.5

Cordovab 8 2.8 10 2.5

Pelicanb 9 2.7 19 0.4

Yakutatb 10 1.9 12 1.9
Appendix IV

Alaskan Ports and Major Transportation 

Networks

Page 40 GAO-03-159 Individual Fishing Quotas

While sablefish remained primarily a frozen product, sablefish ports 

experienced a similar change in rankings (see table 12), because, according 

to processors, many fishermen sell their catch of both halibut and sablefish 

to the processor who pays the most for the halibut.

Table 12: Largest Alaskan Sablefish Ports, 1995 and 2001

Note: Juneau ranked number 20 with 0.4 percent of the landings in 1995 and number 7 with 

5.0 percent in 2001.

a

1995 was the earliest year for which NMFS data were available.

b

Ports with limited access to major transportation networks.

Source: GAO’s analysis of NMFS data.

Port 1995a ranking

Percent of 1995

landings 2001 ranking

Percent of 2001

landings

Seward 1 22.5 1 19.7

Sitkab 2 14.6 3 12.6

Unalaska/Dutch Harborb 3 14.3 2 15.0

Kodiakb 4 11.4 4 9.9

Yakutatb 5 5.8 10 3.6

Pelicanb 6 5.2 15 1.0

Petersburgb 7 4.2 9 4.0

Cordovab 8 3.7 6 5.1

Homer 9 3.1 5 7.0

Hoonahb 10 2.0 8 4.3
Page 41 GAO-03-159 Individual Fishing Quotas

Appendix V

Comments from the Department of 

Commerce ApendxiV

Note: GAO comments 

supplementing those in 

the report text appear 

at the end of this 

appendix.
Appendix V

Comments from the Department of 

Commerce

Page 42 GAO-03-159 Individual Fishing Quotas

See comment 1.

See comment 2.

See comment 3.

See comment 4.

See comment 5.
Appendix V

Comments from the Department of 

Commerce

Page 43 GAO-03-159 Individual Fishing Quotas

See comment 6.

See comment 7.

See comment 8.
Appendix V

Comments from the Department of 

Commerce

Page 44 GAO-03-159 Individual Fishing Quotas

See comment 9.

See comment 10.

See comment 11.
Appendix V

Comments from the Department of 

Commerce

Page 45 GAO-03-159 Individual Fishing Quotas
Appendix V

Comments from the Department of 

Commerce

Page 46 GAO-03-159 Individual Fishing Quotas
Appendix V

Comments from the Department of 

Commerce

Page 47 GAO-03-159 Individual Fishing Quotas

GAO Comments The following are GAO’s comments on NOAA’s written comments provided 

by the Secretary of Commerce’s letter dated November 21, 2002.

1. We revised the text to reflect that the domestic commercial fish catch 

remained relatively the same as in 2001 as it was in 1990.

2. We revised the text to reflect that the IFQ program extended the halibut 

and sablefish fishing seasons in some areas.

3. We changed the text to make it clear that the cost differential was due 

to the fact that Homer and Seward had access to a road system.

4. We revised the legend for figure 10 to show that the airports are 

international airports.

5. NOAA commented that the report’s treatment of wreckfish would have 

benefited from consulting a 1994 wreckfish article. We reviewed the 

article and determined that generally only the article’s discussion of 

consolidation and control of quota holdings was pertinent to our 

objectives. The article explained that the wreckfish program did not set 

limits on quota holdings, in part, because it would be difficult to 

determine who actually controlled the use of the quota. We believe that 

our report had already adequately addressed this issue. By not defining 

limits, the information needed to determine who controls the use of 

quota is not collected and monitored. For this reason, we did not revise 

our report. 

6. Our point was that banks hold quota for someone else who controls its 

use. As such, consolidation may be greater than NMFS data indicate. 

Nonetheless, we revised the text to make it clearer that financial 

institutions held, but did not control the use of quota in IFQ programs.

7. Although our definition was technically correct, we revised footnote 2 

by providing the definition of bycatch under the Magnuson-Stevens Act.

8. We revised the title of table 1 to make it clear that the table listed 

examples of objectives for the IFQ programs we reviewed.

9. We revised the text to remove some of the redundancy.
Appendix V

Comments from the Department of 

Commerce

Page 48 GAO-03-159 Individual Fishing Quotas

10. We added a footnote to explain that the rules of the Alaskan halibut and 

sablefish program specify limits on quota holdings as quota share use 

caps. 

11. We added a note to tables 3, 4, and 11 to indicate that 1995 was the 

earliest year for which NMFS data were available.
Page 49 GAO-03-159 Individual Fishing Quotas

Appendix VI

GAO Contact and Staff Acknowledgments

ApendxiVI

GAO Contact Keith W. Oleson, (415) 904-2218

Acknowledgments In addition to the name above, Charles W. Bausell, Jr., Susan J. Malone, 

Mark R. Metcalfe, Rebecca A. Sandulli, and Tama R. Weinberg made key 

contributions to this report.

(360198)
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